Exchange for physicals

ABSTRACT

Systems and methods for performing an exchange for physicals (EFP) may comprise receiving, with a matching engine module in communication with a processor, EFP data comprising an amount of securities to be traded and a price. The matching engine module may calculate a first delta percentage between the EFP data and an index based on the amount, the price, and an index value. The matching engine module may calculate a residual delta based on the first delta percentage and an index notional value. The matching engine module may attribute the residual delta to the securities.

TECHNICAL FIELD

The present disclosure relates generally exchange for physicals (EFP)transactions, and more particularly, to systems and methods forproviding new products and trading strategies for expanding EFPtransactions into new markets.

BACKGROUND

In the exchange of futures for physicals (EFP) transactions, a futurescontract on a commodity is generally exchanged for the actual commodity.An EFP may be a trade on a basis corresponding to the difference betweena futures price and a spot price on which the futures price is based.EFPs may be traded over the counter (OTC), and the futures leg of thetransaction may be reported with reference to a cash leg. There is,however, a need for new products and strategies that provide a morecomprehensive EFP solution, and that expand EFP transactions into newmarkets.

SUMMARY

Systems and methods described herein may provide a central order bookfor EFPs. Simultaneous trades in index futures contracts and thecorresponding basket of shares on regulated markets may be affected. AnEFP may be based on an index, and its value expressed in terms of indexpoints. An EFP based on an index may comprise a trade on the basiscorresponding to the difference between an index futures price and anindex spot price. For example, one EFP index may have a value of 3495index points and a particular futures may be priced at 3486 indexpoints, then the EFP price for a trade may be 3486-3495=−9 index points.This may allow allocation of EFP residuals in a way that closely matchesthe market. The EFP may be traded continuously and anonymously. MultipleEFP expiry months may be made available for trading. Market makers mayprovide price support and ensure liquidity of the EFP order book. Boththe futures leg and the cash leg derived from the EFP transaction may becleared by a suitable clearing facility.

BRIEF DESCRIPTIONS OF THE DRAWINGS

The foregoing summary and the following detailed description are betterunderstood when read in conjunction with the appended drawings.Exemplary embodiments are shown in the drawings, however, it isunderstood that the embodiments are not limited to the specific methodsand instrumentalities depicted herein. In the drawings:

FIG. 1 shows an exemplary network according to an embodiment of thepresent disclosure.

FIG. 2 shows an exemplary EFP transaction flow diagram according to anembodiment of the present disclosure.

FIG. 3 shows an exemplary quantity calculation process according to anembodiment of the present disclosure.

FIG. 4 shows an exemplary price calculation process according to anembodiment of the present disclosure.

DETAILED DESCRIPTION

Systems and methods described herein may provide new, index-based EFPtransactions. An on-exchange EFP cleared market may include detailed andspecific mechanisms such as a pre-negotiated trade facility, pricelimits, market surveillance, and/or an automated price allocationmechanism.

Systems and methods described herein may comprise one or more computers,which may also be referred to as processors. A computer may be anyprogrammable machine or machines capable of performing arithmetic and/orlogical operations. In some embodiments, computers may compriseprocessors, memories, data storage devices, and/or other commonly knownor novel components. These components may be connected physically (e.g.,via a wired network), through wireless links (e.g., via a wirelessnetwork), or via a combination thereof. Computers may also comprisesoftware which may direct the operations of the aforementionedcomponents. Computers may be referred to with terms that are commonlyused by those of ordinary skill in the relevant arts, such as servers,PCs, mobile devices, routers, switches, data centers, tablets, mobilecommunication devices, smartphones, distributed computers, and otherterms. Computers may facilitate communications between users and/orother computers, may provide databases, may perform analysis and/ortransformation of data, and/or perform other functions. It will beunderstood that those terms, as used herein, are interchangeable, andany computer capable of performing the described functions may be used.

Computers may be linked to one another via a network or networks,whether wired and/or wireless. A network may be any plurality ofcompletely or partially interconnected computers wherein some or all ofthe computers are able to communicate with one another. Connectionsbetween computers may be wired (e.g., via Ethernet, coaxial, optical, orother wired connection), wireless (e.g., via Wi-Fi, WiMax, or otherwireless connection), or a combination thereof. Connections betweencomputers may use any protocols, including connection oriented protocolssuch as TCP or connectionless protocols such as UDP. Any connectionthrough which at least two computers may exchange data can be the basisof a network.

Turning now to FIG. 1, a network 100 according to an exemplaryembodiment of the present disclosure is shown. The network 100 mayinclude an exchange network 110, for example the Internet or a dedicatedmarket network, connecting one or more computers 120, 130, 140. Forexample, an exchange 120 may include one or more computers incommunication with the network 110; and one or more buyer 130 computersand one or more seller 140 computers may communicate with the exchange120 and/or each other via the network 110. The exchange 120 computer mayinclude a matching engine module (not shown) comprisingcomputer-readable instructions that, when executed by a processor, causethe exchange computer to perform various functions described herein. Thenetwork 100 of FIG. 1 is one possible example network, and the exchange120 computers, buyer 130 computers, and seller 140 computers may beinterconnected in any way.

FIG. 2 shows an exemplary EFP transaction flow diagram 200 according toan embodiment of the present disclosure. In this example, EFPtransactions (or “EFPs”) may be based on an index. As shown in the flowdiagram 200, an order book 210 embodied on one or more computers 120 maybe accessible to a buyer computer 130 and/or a seller computer 140 via,for example, at least one of a wired and/or wireless network connection.The one or more computers 120 embodying the order book 210 may be a partof a computerized exchange platform 120 or other similar facility orsystem.

In operation, the EFP buyer computer 130 and EFP seller computer 140 maysubmit EFP orders (e.g., EFP Buy and EFP Sell orders) to the exchangeplatform 120. In this embodiment, the EFP is a “September-13” EFP. Oncethe price of the order(s) submitted by the EFP buyer computer 130 andEFP seller computer 140 reach an equilibrium point, orders are matched,and, an EFP trade with two legs may be created. The EFP Buy and EFP Sellorders have become an EFP trade with an agreed EFP price. The executionof the EFP trade implies the execution of two legs per EFP trade: aderivatives leg 230 of the EFP and the underlying cash equity leg 240 ofthe EFP. To reach an equilibrium in the EFP order book 210, the price ofan incoming order may be compared to the price of orders already in theorder book 210 on the opposite side (e.g., counter orders). If the priceis acceptable, orders in the EFP order book 210 may be selected andmatched with the incoming order. The selection of orders in the EFPorder book 210 may follow a pre-specified priority rule (for example“price/time priority”, whereby orders with the best price (i.e. highestprices on the buy side and lowest prices on the sell side) are matchedfirst, and within the same price, best priority orders (i.e., ordersarriving first or orders having the oldest timestamp) are matchedfirst). However, it should be understood that other priority and/ormatching rules, or no priority and/or matching rules, may be utilized inaccordance with the present disclosure.

Once orders are matched (e.g., an EFP Buy order and an EFP Sell order),the exchange platform 120 may automatically (1) calculate both a priceand a quantity to a futures leg and a cash leg for each of theunderlying index securities components; and (2) generate an EFPtransaction comprising one futures leg transaction and a cash legtransaction for each of the underlying index securities components. Onthe derivatives leg 230, a cash payment (or any other type of payment)and/or a margin change (e.g., reduced margin call) may be made from abuyer (via the buyer computer 130) to a seller (via the seller computer140) through the exchange platform 120 acting as a central counterparty,in exchange for the September-13 futures from the seller (via sellercomputer 140) to the buyer (via buyer computer 130).

On the underlying cash equity leg 240 of the EFP, cash payment (or anyother type of payment) and/or a margin change (e.g., reduced margincall) may be made from the seller (via seller computer 140) to the buyer(via buyer computer 130) through the central exchange platform 120operating as the central counterparty, in exchange for a basket ofshares from buyer (via the buyer computer) 130) to the seller (via theseller computer 140). Additionally, an acknowledgment with EFP tradeattributes may be sent (by the exchange platform 120) to the buyer andseller via their respective computers (130, 140), for example, via awired and/or wireless network by a market data publisher and transactionreporting module 220 of the exchange platform 120. Prices of theindividual cash securities may be automatically allocated, for example,by the exchange platform 120, as further discussed below. This automaticallocation may be based on, for example, an agreed EFP price and a lasttraded price of each underlying index security component, which may thenbe adjusted by applying an equivalent percentage deviation to each indexsecurity component while at the same time minimizing any residual pricedeviation resulting from a price rounding. In one embodiment, thegeneration of the prices of all the cash and futures legs may bedetermined such that a difference between the value of the index futuresleg and the basket of shares is equal to the EFP price multiplied by thevolume traded. Once the prices are allocated, trades may be publishedand reported to regulators and clearing house.

In some embodiments, a minimum trade size (e.g., in terms of lots) mayapply, as well as a minimum incremental trade size. For example, for aminimum trade size of 250 lots and incremental size of 50 lots, orderswhich may be executed may be orders for 250 lots, 300 lots, 350 lots,and so on. New orders below 250 lots or for lots that are not inincrements of 50 may be rejected by the exchange platform 120.

Some embodiments may also include a price limit mechanism. Price limitsmay be set above and/or below a theoretically calculated EFP price inbetween which the EFP can be traded. For instance, for a price limit ofthree (3) index points and a theoretical EFP price (e.g., the “pricelimit reference price”) is calculated to be negative five (−5), the EFPmay trade anywhere from between negative eight (−8) and negative two(−2) index points. Thus, an order at negative nine (−9) index points maybe rejected. Price limits may be adjusted periodically (e.g., daily) andmay be monitored by a market services analyst system.

In some embodiments, the exchange platform 120 may have specifiedcontract trading hours for EFPs. For example, contract trading hours forone market may be between 9.00 to 18.30, opening in line with the cashmarkets, and closing at the end of the index futures' day session, onehour after the close of the cash markets. Notably, however, othertrading hours (or no specified trading hours) may be implemented inaccordance with this disclosure. In addition, certain EFPs may continueto be available even in the case where one or more securities in theindex are no longer available for any reason (e.g., one or moresecurities are suspended).

Prices of the cash individual securities may be allocated automaticallyusing a price allocation module. The price allocation module maycomprise computer-readable instructions that when executed (by one ormore processors) determines and calculates automatically the cash pricesand quantities to be affected to each constituent stock security suchthat it reflects the value of the cash leg traded embedded in the EFPprice, such that a combined EFP cash basket constituent prices mayclosely match an agreed basis/EFP price. The allocation module mayallocate residuals to a constituent of an index to closely mirror theindex itself. This price allocation module (and other modules describedherein) may be a part of (and/or performed by) a matching engine moduleof a computer system, such as (for example) an exchange platform similarto the one discussed above with respect to FIG. 2. FIGS. 3-4 illustrateexample computer-implemented processes for automatically calculating andallocating EFP prices in accordance with this disclosure.

Turning now to FIG. 3, an exemplary quantity calculation process 300according to an embodiment of the present disclosure is shown. Thisprocess 300 may be performed automatically by an exchange platformcomputer/computer system (e.g., such as exchange platform 120 of FIG. 2)when an EFP is agreed upon between a buyer and seller. Thus, forpurposes of this exemplary embodiment, it is assumed that datarepresenting a notational amount to be traded and a corresponding pricehas been received/entered into the computer (e.g., exchange platform)performing this quantity calculation process 300. Upon receiving thisdata, the computer, in step 310, may calculate a component securityweight from a free float, as defined by the number of shares that arereadily available to the public and taking into account thespecificities of the index methodology to define the restricted sharesthat are not taken into account and excluded from the free float, and anumber of shares for each component security using, for example, theEquation 1, below.component security weight=free float*number of shares  (1)

In Table 1, for instance, company share “A” only has free floatingshares, therefore the “component security weight” is the same as thetotal number of shares in that company. In the case of company “B”, forexample, 60% of the total number of shares are free float, therefore,the component security weight is 60% of 125,971,058.

Next, in step 320, for each component security, the computer maycalculate a rounded quantity of component security from the componentsecurity weight, an EFP quantity, an index future lot size, and an indexdivisor. The rounded quantity of component security (“RQCS”) may haveall decimals removed, and may be calculated according to Equation 2,below.

$\begin{matrix}{{RQCS} = \frac{{EFP}\mspace{14mu}{quantity}*{index}\mspace{14mu}{component}\mspace{14mu}{security}\mspace{14mu}{weight}*{future}\mspace{14mu}{lot}\mspace{14mu}{size}}{{index}\mspace{14mu}{divisor}}} & (2)\end{matrix}$As shown in Table 1, for instance, the “RQCS” of the first security “A”may be rounded to zero decimals of the first security as a result ofEquation (2):

${RQCS} = {\frac{1000*91,961,373*10}{189,994,497.400937} = 4840}$The EFP quantity is the quantity traded: 1000 in the example outlined inTable 1. The index divisor may be available to the market, and in thisexample, it is 189,994,497.40). The component security weight may thenbe calculated for each constituent security, as discussed above. Forcompany A of Table 1, for example, it is 91,961,373. The futures lotsize may be fixed by an exchange platform in the relevant contractspecifications (in this example, for a particular index futures, it isfixed at 10 lots by an exchange platform).

In step 330, the computer may sum all the rounded quantities ofcomponent securities multiplied by their Last Traded Price (“LTP”) togenerate the current index value, as shown in Equation 3.

$\begin{matrix}{{{current}\mspace{14mu}{index}\mspace{14mu}{value}} = {\sum\limits_{i = 1}^{40}( {{RQCS}_{i}*{LTP}\mspace{14mu}{component}\mspace{14mu}{security}} )}} & (3)\end{matrix}$In Table 1, for instance, the Current index value corresponds to34,953,786=(4,840*169.25)+(3,978*137.95)+ . . . .

Then, at step 340, the computer may calculate an index notional value tobe allocated from the index future LTP, EFP price, EFP quantity, andindex future lot size according to Equation 4, below.index notional to be allocated=[LTP of Index future−EFP price]*EFPquanity*future lot size  (4)In the example illustrated by Table 1 below, for instance, the IndexNotional to be Allocated is 34,950,000=[3486.00−(−9)]*1000*10. The LastTraded Price of the relevant index futures is available marketinformation. The EFP quantity is the quantity traded: 1000 in theexample outlined in Table 1. The futures lot size may be fixed by anexchange platform in the relevant contract specifications (in thisexample, for a particular index futures, it is fixed at 10 lots by anexchange platform).

The allocation algorithm may also include a “first delta” calculation tolimit rounding errors and match as close as possible the notional valueof the index. In step 350, the computer may calculate a first delta asthe difference between the index notional value to be allocated and thecurrent index value, as shown in Equation 5.first delta=index notional value to be allocated−current indexvalue  (5)In Table 1, for instance, the first delta would be34,950,000−34,953,786=−3,786.

Next, in step 360, the computer may calculate a first delta percentagefrom the first delta and the current index value, as shown in Equation 6below.

$\begin{matrix}{{{first}\mspace{14mu}{delta}\mspace{14mu}\%} = \frac{{first}\mspace{14mu}{delta}}{{current}\mspace{14mu}{index}\mspace{14mu}{value}}} & (6)\end{matrix}$As shown in Table 1, for instance, the first delta would be−3,786/34,953,786=−0.0108%. The illustrative results of the exemplaryquantity calculation process 300 shown in FIG. 3 and discussed above aredisplayed in Table 1 below.

TABLE 1 LTP of the Index Future 3486.00 Future Lot Size  10 IndexDivisor 189,994,497   .400937 EFP Price  −9 EFP Quantity 1000 ComponentSecurity Rounded Weight Quantity of (absolute) Component ISIN Code Step310: Security Index Last Free float x to Zero Component Traded FreeNumber of Number of Decimals Security Name Price float Shares SharesStep 320  1 FR0000000001 “A” 169.25 1  91,961,373  91,961,373 4,840  2FR0000000005 “B” 137.95 0.6 125,971,058  75,582,635 3,978  3FR0000000009 “C” 129.05 0.5 507,919,825 253,959,913 13,367   4FR0000000013 “D” 103.1 0.4 602,984,082 241,193,633 12,695   5FR0000000017 “E” 97.73 0.7  84,701,133  59,290,793 3,121  6 FR0000000021“F” 93.86 1 312,070,021 312,070,021 16,425   7 FR0000000025 “G” 87.320.9 112,933,663 101,640,297 5,350  8 FR0000000029 “H” 86.45 0.75265,310,605 198,982,954 10,473   9 FR0000000033 “I” 73.81 0.9213,071,956 191,764,760 10,093  10 FR0000000037 “J” 68.89 1 181,999,897181,999,897 9,579 11 FR0000000011 “K” 68.23 0.9 1,326,829,007  1,194,146,106   62,852  12 FR0000000012 “L” 51.99 0.95 553,218,921525,557,975 27,662  13 FR0000000014 “M” 48.86 0.9 643,162,000578,845,800 30,466  14 FR0000000014 “N” 43.69 0.65 287,247,518186,710,887 9,827 15 NL0000000001 “O” 43.225 0.85 210,008,734178,507,424 9,395 16 NL0000000002 “P” 41.865 0.8 1,253,727,565  1,002,982,05 52,790 17 NL0000000025 “Q” 38.255 0.9 2,365,134,263  2,128,620,837   112,036  18 NL0000000004 “R” 37.975 0.85 121,626,521103,382,543 5,441 19 NL0000000005 “S” 37.895 0.65 295,722,284192,219,485 10,117  20 NL0000000006 “T” 33.445 0.8 575,410,549460,328,439 24,229  21 NL0000000007 “U” 31.4 0.9 155,770,362 140,193,3267,379 22 NL0000000008 “V” 30.835 0.55 417,029,585 229,366,272 12,072  23NL0000000009 “W” 29.94 0.75 531,064,935 398,298,701 20,964  24NL0000000010 “AM” 29.795 0.95 263,388,995 250,219,545 13,170  25NL0000000011 “AN” 27.28 0.7 294,808,487 206,365,941 10,862  26NL0000000012 “Z” 26.845 0.85 780,271,348 663,230,646 34,908  27NL0000000013 “AA” 25.35 0.5 827,060,325 413,530,163 21,765  28NL0000000014 “AB” 25.2 0.75 227,251,446 170,438,585 8,971 29NL0000000015 “AC” 18.885 0.8 709,214,653 567,371,722 29,863  30NL0000000016 “AD” 17.98 0.6 314,869,079 188,921,447 9,944 31NL0000000017 “AE” 17.05 0.55 2,323,080,932  1,277,694,513   67,249  32NL0000000018 “AF” 16.465 0.9 1,301,127,185  1,171,014,467   61,634  33NL0000000019 “AG” 14.1 0.15 1,848,866,662  277,329,999 14,597  34NL0000000020 “AH” 12.365 0.75 2,357,335,873  1,768,001,905   93,055  35NL0000000021 “AI” 11.62 0.6 1,560,914,610  936,548,766 49,293  36NL0000000022 “AJ” 8.202 0.7 2,648,885,383  1,854,219,768   97,593  37NL0000000023 “AK” 8.176 0.7 522,086,849 365,460,794 19,235  38NL0000000024 “AL” 5.78 0.4 2,498,020,537  999,208,215 52,591  39NL0000000003 “X” 4.633 0.7 910,559,805 637,391,864 33,548  40FR0000000007 “Y” 0.819 0.95 2,326,563,826  2,210,235,635   116,332 Current Index Value (Step 330): 34,953,786 Index Notional to beAllocated (Step 340): 34,950,000 First Delta: −3,786 First Delta % (Step360): −0.0108%

After a first delta percentage calculated (e.g., according to theprocess 300 of FIG. 3), a price may be calculated. FIG. 4 illustrates anexemplary price calculation process 400 according to an embodiment ofthe present disclosure. This process 400 may be performed automaticallyby a computer or computer system, such as, for example, an exchangeplatform computer.

At step 410, the computer may attribute the first delta percentageequally to each component security according to Equation 7 below, sothat the percent price change is the same for each component security.This may produce a new component security price for each componentsecurity. As shown in Table 2 below, the new component security price ofshare “A” is the LTP (169.25) multiplied by 1+ the delta calculatedabove, or 1+(−0.0108%)=0.9892. The result: 169.25*0.9892=169.2317 isrounded to 4 decimal places.new component security price=LTP component security*(1+delta %) roundedto one or more decimal places  (7)In one embodiment, the new component security price may be rounded tofour or more decimal places.

Then, at step 420, the computer may sum the rounded quantities ofcomponent securities (which may be calculated from the quantitycalculation of Equation 2 above) multiplied by their new componentsecurity price (which may be calculated from the quantity calculation ofEquation 7 above) to generate the new index value, as shown in Equation8. In the exemplary results shown in Table 2, for instance, the newindex value is

$\begin{matrix}{{34,950,013} = {{( {4,840*169.2317} ) + ( {3,978*137.9351} ) + {\ldots\mspace{14mu}{new}\mspace{14mu}{index}\mspace{14mu}{value}}} = {\sum\limits_{i = 1}^{40}\mspace{14mu}{{rounded}\mspace{14mu}{quantity}\mspace{14mu}{of}\mspace{14mu}{component}\mspace{14mu}{security}_{i}*{new}\mspace{14mu}{component}{\mspace{11mu}\;}{security}\mspace{14mu}{price}}}}} & (8)\end{matrix}$

In step 430, the computer may calculate the residual delta, according toEquation 9 below, as the difference between the index notional value tobe allocated and the new index value (which may be calculated accordingto Equation 8 as described above in step 420). As illustrated in Table 2below, for instance, the residual delta is −13,0812(=34,950,000−34,950,013).residual delta=index notional value to be allocated−new index value  (9)

The computer may then attribute the residual delta to the componentsecurities at step 440 by attributing (e.g., adding or removing) aminimum tick of, for example, 0.0001 to a New component security price(e.g., as calculated in step 410), for example, starting from the lowestimpact stock (e.g., the highest price) to the highest impact stock ifthis reduces the absolute value of the residual delta. In Table 3, theshares are first sorted in descending order based on their last tradedprice (from highest to lowest) so that share “A” is the first listedshare and share “Y” the last listed share in the list of shares. Ascalculated in step 430, the residual delta is −13.0812, so that itsabsolute value is 13.0812. When subtracting the minimum tick size of0.0001 to the New Component Security Price of share “A” (i.e. 169.2137as calculated in Step 410), it reduces the absolute residual delta from−13.0812 to −12.6. Since it reduces the absolute residual delta, theprice of share “A” is subtracted by 0.0001, so that its new pricebecomes 169.2316. Step 440 may iterate this for each share in the listfrom the first to the last. For share “Y”, for example, adding orsubtracting the minimum tick size of 0.0001 to the New ComponentSecurity Price of share “Y” does not reduce the absolute residual delta.Thus, the price of share “Y” is left unchanged at 11.63.

The illustrative results of the exemplary price calculation process 400described above are shown in Tables 2 and 3 below. The calculations inTable 2 may provide a residual delta value after generating a new indexvalue, whereas the calculations in Table 3 may provide a delta afterattributing a minimum tick.

TABLE 2 New Component Security Price = Last Rounded LTP* Trade Quantityof (1 + FirstDelta %) Price Component Secuity Rounded to 4 Price Name(in EUROs) to Zero Decimals Decimals (Step 410) Variation 1 “A” 169.254,840 169.2317 = Round −0,0108% (169.25 × 0.9892; 4) 2 “B” 137.95 3,978137.9351 = Round −0,0108% (137.95 × 0.9892; 4) 3 “C” 129.05 13,367120.0360 −0,0108% . . . . . . . . . . . . . . . 39 “X” 4.633 33,5484.6325 −0,0108% 40 “Y” 0.819 116,332 0.8189 −0,0122% Index Value toAllocate (Step 340): 34,950,000 Sum of QTY* New Price 34,950,013 (NewIndex Value) (Step 420): Residual Delta (Step 430): −13.0812

TABLE 3 Impact of 0.0001 New Price Change on After 2nd Index Delta Step(Step Price Name Value Decision Change 440) Variation “A” 0.48 −0.0001−12.6 169.2316 −0.01% “B” 0.4 −0.0001 −12.2 137.935 −0.01% “C” 1.34−0.0001 −10.86 129.0359 −0.01% . . . . . . “X” 3.35 0 −0.13 4.6325−0.01% “Y” 11.63 0 −0.13 0.8189 −0.01% index Value to Allocate:34,950,000 € Sum of QTY* New Price: 34,950,000.13 €

Notably, an index-based EFP trading solution such as the systems andmethods described above may include a fully automated straight-throughprocessing solution. Central counterparty and clearing systems may beutilized to guarantee both futures and cash legs of EFPs. Continuoustrading combined with the support of market makers and theimplementation of market making schemes may allow EFP pricing to closelymatch market pricing. Liquidity may be concentrated in a centralexchange and EFP trades may be pre-negotiated prior to submitting thetrade data to the exchange. Regulatory compliance may be provided byautomated post-trade obligations and reporting.

While various embodiments have been described above, it should beunderstood that they have been presented by way of example and notlimitation. It will be apparent to persons skilled in the relevantart(s) that various changes in form and detail can be made thereinwithout departing from the spirit and scope. In fact, after reading theabove description, it will be apparent to one skilled in the relevantart(s) how to implement alternative embodiments.

In addition, it should be understood that any figures which highlightthe functionality and advantages are presented for example purposesonly. The disclosed methodology and system are each sufficientlyflexible and configurable such that they may be utilized in ways otherthan that shown.

Although the term “at least one” may often be used in the specification,claims and drawings, the terms “a”, “an”, “the”, “said”, etc. alsosignify “at least one” or “the at least one” in the specification,claims and drawings.

In addition, the terms “comprising”, “including”, etc. signify“including, but not limited to” in the specification, claims anddrawings.

The invention claimed is:
 1. A computer-implemented method comprising:continuously monitoring, by a market surveillance device incommunication with one or more processors, one or more live index valuesthat fluctuate according to market movement; receiving, by a matchingengine module in communication with the one or more processors,transaction data via one or more of a wired and wireless network, thetransaction data comprising an amount of securities to be traded and aprice for the amount of securities to be traded; and continuouslygenerating, by the matching engine module based on the one or more liveindex values, a new price for the securities to be traded that closelymatches market pricing by modifying a price of each underlying componentof the securities based, at least in part, on the fluctuation of thelive index values, wherein each underlying component of the securitiescomprises a respective number of shares.
 2. The method of claim 1,wherein the transaction data relates to an exchange-for-physical (EFP)transaction.
 3. The method of claim 1, wherein the continuouslygenerating the new price by modifying the price of each underlyingcomponent comprises: calculating a first delta percentage between thetransaction data and an index based on the amount of securities to betraded, the price for the amount of securities to be traded, and a liveindex value among the one or more live index values; applying the firstdelta percentage equally to each underlying component of the securitiesto be traded, thereby generating a new component security price for eachof said underlying components; calculating a residual delta based on thefirst delta percentage and an index notional value; and adjusting one ormore of the new component security prices by a minimum tick size basedon the residual delta.
 4. The method of claim 3, wherein calculating thefirst delta comprises: calculating a component security weight based onthe amount of securities to be traded; calculating a rounded quantity ofcomponent securities based on the amount of securities to be traded andthe component security weight; calculating a current index value basedon the rounded quantity of component securities; calculating an indexnotional to be allocated based on the amount of securities to be tradedand the price for the amount of securities to be traded; calculating afirst delta based on the current index value and the index notional; andcalculating the first delta percentage based on the first delta and thecurrent index value.
 5. The method of claim 4, wherein calculating thecomponent security weight comprises solving the following equation:component security weight=free float*number of shares.
 6. The method ofclaim 4, wherein calculating the rounded quantity of componentsecurities comprises solving the following equation:  rounded  quantity  of  component  security=  $\quad{\quad{\frac{{{EFP}\mspace{14mu}{quantity}*{index}\mspace{14mu}{component}\mspace{14mu}{security}\mspace{14mu}{weight}*{future}\mspace{14mu}{lot}\mspace{14mu}{size}}\quad}{{{index}\mspace{14mu}{divisor}}\quad}{\quad\quad}\quad}}$7. The method of claim 4, wherein calculating the current index valuecomprises solving the following equation:${{current}\mspace{14mu}{index}\mspace{14mu}{value}} = {\sum\limits_{i = 1}^{40}\;( {{rounded}\mspace{14mu}{quantity}\mspace{14mu}{of}\mspace{14mu}{component}\mspace{14mu}{security}_{i}*{LTP}\mspace{14mu}{component}\mspace{14mu}{security}} )}$8. The method of claim 4, wherein calculating the index notional to beallocated comprises solving the following equation:index notional to be allocated=[LTP of index future−EFP price]*EFPquantity*future lot size
 9. The method of claim 4, wherein calculatingthe first delta comprises solving the following equation:first delta=index notional value to be allocated−current index value.10. The method of claim 4, wherein calculating the first deltapercentage comprises solving the following equation:${{first}\mspace{14mu}{delta}{\mspace{11mu}\;}\%} = {\frac{{first}\mspace{14mu}{delta}}{{current}\mspace{14mu}{index}\mspace{14mu}{value}}.}$11. The method of claim 3, wherein calculating the residual deltacomprises: calculating, by the matching engine module, a new componentsecurity price based on the first delta percentage; calculating, by thematching engine module, a new index value based on the new componentsecurity price and a rounded quantity of component securities; andcalculating, by the matching engine module, the residual delta based onan index notional to be allocated and the new index value.
 12. Themethod of claim 11, wherein calculating the new component security pricecomprises solving the following equation:new  component  security  price = LTP  component  security * (1 + delta  %)  rounded  to  one  or  more  decimal  places13. The method of claim 11, wherein calculating the new index valuecomprises solving the following equation:${{new}\mspace{14mu}{index}\mspace{14mu}{value}} = {\sum\limits_{i = 1}^{40}\;{{rounded}\mspace{14mu}{quantity}\mspace{14mu}{of}\mspace{14mu}{component}\mspace{14mu}{security}_{i}*{new}\mspace{14mu}{component}\mspace{14mu}{security}\mspace{14mu}{price}}}$14. The method of claim 11, wherein calculating the residual deltacomprises solving the following equation:residual delta=index notional value to be allocated−new index value. 15.A system comprising: one or more processors; a market surveillancedevice in communication one or more processors, the market surveillancedevice configured to continuously monitor one or more live index valuesthat fluctuate according to market movement; and a matching enginemodule in communication with the one or more processors, the matchingengine module configured to receive, transaction data via one or more ofa wired and wireless network, the transaction data comprising an amountof securities to be traded and a price for the amount of securities tobe traded; the matching engine module further configured to continuouslygenerate, based on the one or more live index values, a new price forthe securities to be traded that closely matches market pricing bymodifying a price of each underlying component of the securities based,at least in part, on the fluctuation of the live index values, whereineach underlying component of the securities comprises a respectivenumber of shares.
 16. The system of claim 15, wherein the transactiondata relates to an exchange-for-physical (EFP) transaction.
 17. Thesystem of claim 15, wherein the matching engine module, as part of thecontinuously generate the new price by modifying the price of eachunderlying component, is further configured to: calculate a first deltapercentage between the transaction data and an index based on the amountof securities to be traded, the price for the amount of securities to betraded, and a live index value among the one or more live index values,apply the first delta percentage equally to each underlying component ofthe securities to be traded, thereby generating a new component securityprice for each of said underlying components, calculate a residual deltabased on the first delta percentage and an index notional value, andadjust one or more of the new component security prices by a minimumtick size based on the residual delta.
 18. The system of claim 17,wherein the matching engine module is further configured to: calculate acomponent security weight based on the amount of securities to betraded; calculate a rounded quantity of component securities based onthe amount of securities to be traded and the component security weight;calculate a current index value based on the rounded quantity ofcomponent securities; calculate an index notional to be allocated basedon the amount of securities to be traded and the price for the amount ofsecurities to be traded; calculate a first delta based on the currentindex value and the index notional; and calculate the first deltapercentage based on the first delta and the current index value.
 19. Thesystem of claim 18, wherein the matching engine module is configured tocalculate the component security weight by solving the followingequation:component security weight=free float*number of shares.
 20. The system ofclaim 18, wherein the matching engine module is configured to calculatethe rounded quantity of component securities by solving the followingequation: rounded  quantity  of  component  security=  $\quad{\quad{\frac{{{EFP}\mspace{14mu}{quantity}*{index}\mspace{14mu}{component}{\mspace{11mu}\;}{security}\mspace{14mu}{weight}*{future}\mspace{14mu}{lot}\mspace{14mu}{size}}\quad}{{{index}\mspace{14mu}{divisor}}\quad}{\quad\quad}}}$21. The system of claim 18, wherein the matching engine module isconfigured to calculate the current index value by solving the followingequation:${{current}\mspace{14mu}{index}\mspace{14mu}{value}} = {\sum\limits_{i = 1}^{40}\;( {{rounded}\mspace{14mu}{quantity}\mspace{14mu}{of}\mspace{14mu}{component}\mspace{14mu}{security}_{i}*{LTP}\mspace{14mu}{component}\mspace{14mu}{security}} )}$22. The system of claim 18, wherein the matching engine module isconfigured to calculate the index notional to be allocated by solvingthe following equation:index  notional  to  be  allocated = [LTP  of  index  future − EFP  price] * EFP  quantity * future  lot  size23. The system of claim 18, wherein the matching engine module isconfigured to calculate the first delta by solving the followingequation:first delta=index notional value to be allocated−current index value.24. The system of claim 18, wherein the matching engine module isconfigured to calculate the first delta percentage by solving thefollowing equation:${{first}\mspace{14mu}{delta}{\mspace{11mu}\;}\%} = {\frac{{first}\mspace{14mu}{delta}}{{current}\mspace{14mu}{index}\mspace{14mu}{value}}.}$25. The system of claim 17, wherein the matching engine module isfurther configured to: calculate a new component security price based onthe first delta percentage; calculate a new index value based on the newcomponent security price and a rounded quantity of component securities;and calculate the residual delta based on an index notional to beallocated and the new index value.
 26. The system of claim 25, whereinthe matching engine module is configured to calculate the new componentsecurity price by solving the following equation:new  component  security  price = LTP  component  security * (1 + delta  %)  rounded  to  one  or  more  decimal  places27. The system of claim 25, wherein the matching engine module isconfigured to calculate the new index value by solving the followingequation:${{new}\mspace{14mu}{index}\mspace{14mu}{value}} = {\sum\limits_{i = 1}^{40}\;{{rounded}\mspace{14mu}{quantity}\mspace{14mu}{of}\mspace{14mu}{component}\mspace{14mu}{security}_{i}*{new}\mspace{14mu}{component}\mspace{14mu}{security}\mspace{14mu}{price}}}$28. The system of claim 25, wherein the matching engine module isconfigured to calculate the residual delta by solving the followingequation:residual delta=index notional value to be allocated−new index value.